Since early September, Bitcoin has been legal tender in El Salvador. Businesses and shopkeepers there must now accept Bitcoin as payment, provided they have the necessary technology. El Salvador is the first country in the world where Bitcoin is legal tender. Bitcoin is also traded in the Netherlands. The question is whether an employer may pay an employee’s wages in Bitcoin.
Case law
In 2014, the District Court Overijssel ruled that Bitcoin is not legal tender. Users store their Bitcoin in digital wallets. These wallets resemble bank and giro accounts and each have their own number. However, wallets are not managed by a third party such as a bank, but by the users themselves. A user is not a giro institution within the meaning of the law (Section 6:114 of the Dutch Civil Code). The court ruled that Bitcoin does not transfer into the wallet provider’s assets, and that no contractual relationship exists between the Bitcoin owner and the wallet provider. In the court’s view, this meant there was no giro-based money within the meaning of Section 6:114 BW. The court ruled that Bitcoin is not legal tender, but can function as a medium of exchange.
This ruling aligns with an earlier position of the Minister of Finance. In 2013, the Minister wrote that Bitcoin does not fall under the definition of (electronic) money within the meaning of the Financial Supervision Act, and that Bitcoin does not qualify as legal tender, though it is a medium of exchange between private individuals.
Does this mean an employer may not pay an employee’s wages in Bitcoin?
The law
Section 7:616 of the Dutch Civil Code provides that the employer is required to pay the employee’s wages within a certain time. Section 7:617 BW provides that the agreed form of wages may only consist of:
- money;
- goods suitable for the personal use of the employee and their household, excluding alcoholic beverages and other substances harmful to health;
- use of housing, including its lighting and heating;
- services, facilities and work performed by or for the account of the employer, including instruction, board and lodging;
- securities, claims, other entitlements and evidence thereof, and vouchers.
Under Section 7:620(1) BW, wages must also be paid in Dutch legal tender or by bank transfer within the meaning of Section 6:114 BW. Section 7:620(3) BW provides that payment of wages in a form other than money is made according to what has been agreed, or, absent any agreement, according to custom.
Wages may therefore not be paid in a non-legal tender. For now, this means an employer may not pay an employee’s wages (in full) in Bitcoin.
Section 7a of the Minimum Wage and Minimum Holiday Allowance Act provides that the statutory minimum wage owed must be paid by bank transfer within the meaning of Section 6:114 BW. Bitcoin does not fall under this either.
The minimum wage may therefore not be paid to an employee in Bitcoin. Anything above the statutory minimum wage may be paid to an employee in Bitcoin, but only where both parties agree to this. BTC Direct and Domino’s Pizza, for example, make use of this. Both parties must agree to it in writing.
Conclusion
An employer may therefore not pay the entire wage in Bitcoin. Wages above the minimum wage may be paid in Bitcoin, provided this is agreed between the parties in writing.
For the District Court Overijssel ruling, click here (in Dutch).
For the letter from the Minister of Finance, click here (in Dutch).
Questions about the above?
Please contact one of Sørensen Advocaten’s employment lawyers. Call: +31 (0)10-2492444
